8 Myths About India's Growth

— April 29, 2013

By Daniel Altman

On its current path, India shows no obvious signs of rewriting the textbooks; on the contrary, it has confirmed much of what economists already understood about urbanization, industrialization, trade, and institutions.

Is India different? Last month, India's finance minister confidently declared that nothing could stop his country from becoming the world's third-biggest economy. He may well be right, but size alone does not make India a special case. Its growth has been fast, but it is no trailblazer.

Here are eight popular myths about India's growth, all of which are easily debunked:

India has outperformed other emerging economies in the recent past. In the two decades from 1992 to 2012, average living standards in India did rise faster than those in most countries that started from a similar level. In fact, only nine other countries in the world saw living standards, measured by purchasing power, climb more quickly: Albania, Armenia, Bhutan, China, Equatorial Guinea, the Maldives, Mozambique, Sudan, and Vietnam. Faster growth was to be expected in countries that started out with lower living standards than India's, but several of these -- Albania, Armenia, Bhutan, China, and the Maldives -- actually started out with higher purchasing power. Relative to them, India underperformed.

India will grow faster than other emerging economies in the future. For the next five years, the International Monetary Fund projects that living standards in several countries will grow faster than India's. Among them, again, are countries with a higher starting position: Bhutan, China, the Republic of Congo, and Georgia. India will likely outperform many other economies that have similar living standards today, but it hasn't unlocked every secret of economic growth just yet.